Time to look at the bigger picture
ICTU’s Macdara Doyle calls on the Government to focus on jobs and growth and rejects its claim that ‘there is no other way.’
Congress does not believe that the budget deficit can be reduced by three percent of GDP by 2014 without doing serious and perhaps irreparable damage to our economy and society.
The date is arbitrary and artificial and bears no relation to our everyday reality.
Indeed, when a Congress delegation met with EU Commissioner Olli Rehn during his recent visit to Dublin, he conceded that tackling the economic crisis was “not an exact science”.
In other words, there is no one correct solution to our problems and those in power are relying as much on guesswork and speculation as they are on hard figures.
Yet, on each occasion that a Government spokesperson pokes a head above the parapet, we hear the same dreary monotone: “there is no alternative, there is no other way.”
As Commissioner Rehn himself conceded, that is a lie. There is a better, fairer way to tackle the crisis.
Firstly, we need to extend the period of adjustment until 2017, so that we can take a twin track approach: tackle the deficit on a more graduated and phased basis, thus allowing growth a chance to take hold, while simultaneously stimulating job creation and consumer demand.
Jobs and growth are the key. Every single person on the dole represents a cost of €20,000 to the state in lost taxes and welfare payments. Get people back to work you bring your borrowing requirements down immediately.
No country in history has dealt with a deficit by simply cutting and deflating the economy. The United States had a gargantuan deficit in the aftermath of World War II. They never paid it off. Rather they grew the economy to such an extent that the deficit shrunk in proportion.
Thus, history shows that the most successful strategic response to a crisis of this sort is to prioritise growth and jobs. Countries which have adopted the opposite tactic simply deflated their economies into a long-term recession, precisely what happened to Japan in the 1990s.
By continually focusing on budget cuts we are in doing precisely the opposite of what we should be doing. In effect, we are simply throwing more people out of work and making the problem worse.
The Government embarked on this strategy two years ago. So far, we have had three brutal budgets which have taken €14.5 billion from the economy. And the result?
The deficit is bigger than when the process started, the numbers out of work have trebled and the cost of borrowing has gone to levels not seen since the crisis in Greece.
The definition of stupidity is to keep doing the same thing while expecting a different result. By that standard, we have been pursuing ruinously stupid policies for the last two years. Sucking money from the economy, dampening local demand and throwing people out of work is no way to tackle this crisis.
And that is what will happen if Government proceeds with its plan to extract a further €6 billion in Budget 2011.
Congress is not the only organisation saying this. Increasingly, international commentators look at Government policy with incredulity and despair. They see no plan for growth. As the Financial Times noted recently: “The problem for Ireland is no longer a question of profligacy, but whether the country has been too austere in its efforts to reduce debt at the expense of growth.”
More recently the ESRI has added its voice to the view that we cannot reach the 2014 target, without causing long-term damage.
The only vision offered by this Government is at least four more years of despair and misery. Last year we were told we had turned the corner. Now it seems they mistook the corner for a cliff – we need to pull back.
The cuts may give us a healthier looking balance sheet, but they will tear apart the fabric of our society. Time to look at the big picture.
